Explain how a production possibility curve illustrates scarcity. (1 mark)
A point on the PPC shows that an increase in the production of one good can only be achieved by taking resources away form the production of other goods and services. Therefore resources are limited or scarce.
(d) What is the opportunity cost of moving from the production of 8,000 yachts to
the production 10,000 yachts? (1 mark)
The opportunity cost is not producing 15,000 kayaks to gain 2,000 yachts.
(e) With reference to GRAPH 1, explain why production possibility curves are
usually drawn concave to the origin and not as a straight line. (2 marks)
The PPC in GRAPH 1 is drawn concave to the origin because the resources used in the production of yachts are not perfect substitutes to be used in the production of yachts. (1 mark)
The concave PPC illustrates increasing costs. (1/2 mark).
For example moving from Point A to Point C, the opportunity cost is not producing 2,000 yachts to gain 15,000 kayaks. However moving from Point C to Point E, the opportunity cost is not producing 4,000 yachts to only gain 13,000 kayaks. (1/2 mark)